Making Sense of Your Levies

Levies in estates and complexes are like death and taxes – a fact of life. But many people do not fully understand what they are paying for, or why some homeowners have to pay two sets of levies.

To make sense of it, we spoke to Brettenwood Estate Manager Jon Dreyer.

Keeping the estate running
Jon explained that, essentially, levies fund the services and infrastructure that protect residents’ quality of life and property investment.

Just as households need a budget to keep the lights on, put fuel in the car, pay rent or a bond and put food on the table, estates have annual budgets to cover the costs of running and maintaining the community.

These include administrative expenses such as audit fees, office costs, insurance and Community Schemes Ombud Service (CSOS) fees; operational costs such as security, landscaping, maintenance and clubhouse upkeep; and capital expenditure.

Maintenance can be planned, such as painting walls or resurfacing roads, or unplanned, such as replacing a blown light bulb or dealing with a plumbing emergency.

To determine the levy required, estates first identify their expenses, separating needs from wants. A new fleet of golf carts might be desirable, for example, but resurfacing ageing roads is a necessity.

Once expenses have been established, the estate determines how much can be covered through other sources of income. These can include hiring out the clubhouse for events, interest earned on money in the bank, administration fees on property transfers, electricity provision to data providers and penalties.

The remaining expenses are then divided among levy payers to determine how much each member needs to contribute.

You get what you pay for
Ever wondered how estate management pays for the fuel in the vehicles used to carry out its duties, or how those vehicles are serviced? What about the neatly manicured gardens, trimmed hedges and verges, wildlife management or coastal forest restoration work typical of coastal estates? It is all paid for through levies. Then there are resident engagement initiatives, information boards and marketing-related expenses, including website hosting, media costs, Mother’s and Father’s Day gifts and charity golf days.

Security is another major expense. Boom gates, electric fence management, CCTV cameras, security equipment and guards all require funding. There are also various insurance costs, including business risk, buildings, public liability and fidelity cover, to name a few.

Levies essentially pay for many of the services and amenities that homeowners would otherwise have to fund and maintain themselves if they lived in a freestanding property outside an estate. Swimming pools, outdoor lighting, gardens and communal buildings all need to be maintained. If homeowners stop paying their levies, there may not be enough cash flow to keep the estate operating and maintain its infrastructure. This can result in special levies being imposed, meaning those who continue to pay effectively have to carry the burden of costs that should have been covered by everyone.

Why some owners pay two levies
People who live in sectional-title complexes within estates, or in sectional-title complexes outside estates, pay a body corporate levy in addition to any applicable HOA levy.
Body corporate levies generally cover the exterior of the units but within the complex’s perimeter walls. This includes things such as painting buildings, maintaining gutters, repairs, cleaning and insurance.

There is also a difference in how the two levies are calculated. HOA levies are membership-based and generally calculated equally between members, whilst body corporate levies are calculated according to a property’s participation quota. This is determined by dividing the floor area of an individual unit by the total floor area of all the units in the scheme.

In simple terms, HOA levies cover the estate’s shared services and amenities outside the perimeter walls of freestanding homes and sectional-title complexes. Body corporate levies cover the shared areas and infrastructure inside the complex walls but outside the individual units.

So, if you own a sectional-title property within an estate, you generally pay both. If you live in a freestanding house within an estate, you only pay the HOA levy, but you are responsible for the maintenance inside your house’s perimeter wall.

If you lived in a freestanding property outside an estate or complex, you would not pay either type of levy – but you would also be responsible for the costs of maintaining your own property and services. Neglecting those responsibilities can ultimately affect the condition and value of the property.

In that sense, levies are not simply another household expense. They are the mechanism through which owners collectively fund the upkeep, security, services and infrastructure that help protect their properties and maintain the community’s standards.